Widening gap for Australia's low earners

GROWING inequality has won Australia's 1.5 million lowest paid workers an extra $18.70 per week, their biggest pay rise in three years.

The Fair Work Commission hopes the three per cent pay rise, which lifts the minimum wage to $640.90 a week, will help close a widening gap between the country's lowest earners and the rest.

Commission president Justice Iain Ross noted the deterioration in the living standards of minimum wage earners and low cost pressures in the labour market.

"While real earnings have generally increased over the past decade, earnings inequality is increasing," Justice Ross said in Melbourne on Wednesday.

"Over the past five years, the rate of growth in average earnings and bargained rates of pay have outstripped the growth in minimum wages.

"This has reduced the relative living standards of award reliant workers."

But the decision earned the ire of unions, who labelled the pay rise a blow to low income earners.

ACTU secretary Dave Oliver said despite acknowledging inequality the Fair Work Commission only compounded the problem.

"Today's decision is going to compound the gap between average wage earners and the minimum wage," he said.

"If that gap continues we will end up with a US-style working poor in this country.

"We're going to be a nation of haves and have-nots."

Justice Ross said the superannuation guarantee rate increase set to take effect from July was a moderating factor, but the proposed carbon tax repeal was not taken into account.

Working in favour of the pay increase was stronger employment growth tipped for 2014/15, contained inflation, the rise in labour productivity and low wages growth, Justice Ross said.

But youth unemployment and a falling full-time employment to population ratio remained a concern.

The three per cent figure is the highest increase to the minimum wage since July 2011.

While the ACTU had hoped for a pay rise of $27 a week, business groups argued employers could only afford an extra $8.50.

The Australian Chamber of Commerce and Industry chief executive Kate Carnell called the pay rise a blow to employment.

"An increase of $18.70 really will impact on their capacity to employ, particularly young people and people whose skill sets aren't all that high," she told reporters in Canberra.

"It will lead to greater unemployment, and that's not in anybody's interest."

National Retail Association chief executive Trevor Evans said many retailers would be forced to cut either staff numbers or hours.

"It comes at a time when retail employers are facing unprecedented competition from online, overseas-based retailers, as well as additional cost burdens such as escalating energy prices and insurance premiums," he said.

Yet the union representing hospitality and aged care workers, United Voice, said the increase was not enough to ease the financial burden on minimum wage workers.

"Many of our members tell me they are at breaking point already," United Voice national secretary David O'Byrne said.